A contract to purchase a home also called a purchase agreement or sales contract, is an important legal document that outlines the terms and conditions of the sale between the buyer and seller. Here are the key components typically included in a contract to buy a home:
Identification of Parties
The contract will identify the buyer(s) and seller(s) by their full legal names and addresses. Most people use their names as written on their driver’s license or passport.
Property Description
The contract includes a detailed description of the property being sold, including its address, legal description, tax identification, and any unique features or amenities.
Purchase Price
The contract will specify the purchase price agreed upon by the buyer and seller. This includes the total amount to be paid for the property and detailed information on how the money to purchase the property will be obtained by the buyer, whether in cash or a loan.
Deposit or Earnest Money
The contract may specify an amount of money that the buyer will deposit as earnest money to show their commitment to purchasing the property. This deposit, sometimes referred to as a ‘good faith’ deposit, is typically held in escrow until closing and is credited toward the purchase price at closing.
Financing Contingencies
If the buyer is obtaining financing to purchase the property, the contract may include contingencies related to securing a mortgage loan. This may include the deadline for securing financing, the type of loan, and the maximum interest rate.
Closing Date and Possession
The contract will specify the date of closing, which is when the sale of the property will be finalized. It will also outline when the buyer will take possession of the property.
Contingencies
The contract may include various contingencies that must be met for the sale to proceed. Common contingencies include a satisfactory home inspection, appraisal, title search, and the sale of the buyer’s current home.
Disclosure of Property Condition
The seller is typically required to disclose any known defects or issues with the property, such as structural problems, water damage, or environmental hazards they are aware of. It is important to note that if you are the buyer, you should be allowed to negotiate a period to perform due diligence to fully inspect the property and locale to be certain it meets your requirements.
Seller Concessions
The contract may outline any concessions or allowances made by the seller, such as covering closing costs or making repairs to the property before closing.
Closing Costs
The contract should specify which party is responsible for paying various closing costs, such as title insurance, attorney fees, real estate commissions, transfer taxes, and recording fees.
Dispute Resolution
The contract may include provisions for resolving disputes that may arise during the transaction, such as mediation or arbitration.
Other Terms and Conditions
The contract may include additional terms and conditions agreed upon by the buyer and seller, such as the inclusion of personal property, warranties, or special provisions.
It’s essential to review the contract carefully with the help of a real estate agent, and if you have any legal questions to consult an attorney to ensure that all terms and conditions are understood before signing. Once both parties have signed the contract, it becomes legally binding, and both parties are obligated to fulfill their respective obligations outlined in the agreement. With a friendly, clear, and thorough contract, the home buying process can be a pleasant and successful experience for everyone involved.
